J. Sroczyński for WuW No. 12/2009 – Heavy fines imposed on PKP CARGO by the Office of Competition and Consumer Protection

The railway cargo company, PKP CARGO, has been again found guilty of abuse of dominance. The President of the Office of Competition and Consumer Protection (“OCCP”) issued a prohibiting decision and imposed a fine in the amount of 60 million Zlotys (nearly 15 million Euro). The OCCP challenged the contracting scheme applied by PKP CARGO, whereby competing customers (forwarders which operate their own trains) were denied higher rebates. This practice was declared to have a discriminating effect on competitors, as opposed to non-competing forwarders which received better trading conditions. PKP CARGO claimed that competitors were free-riding its rebate system. This consisted in the mandating to PKP CARGO the dispersed, high-cost shipments of goods. Subsequently, competing forwarders were offering to PKP CARGO’s industrial customers lower prices for more lucrative routes operated by own trains. In this manner, according to PKP CARGO, competitors were unjustly building their market potential and the introduced measures were meant to prevent this process. PKP CARGO raised arguments that the principle of equal treatment does not extend to competitors which grow at the cost of the dominant entity. The OCCP did not support this approach and stressed the anticompetitive, exclusionary effect of the practices applied by PKP CARGO. The amount of the fine was established taking into account the repetitive nature of PKP CARGO’s violations. In the last few years, it received several other prohibiting decisions with fines totaling to almost 80 million Zlotys, some of which already became valid.
PKP CARGO enjoys a strong dominant position in Poland, its market share is currently 70%, although in the course of the last decade it constantly decreases from a full monopoly. It is the third largest railway cargo company in Europe and the second in the European Union.

The National Health Fund (“NFZ”) is a dominant entity on the Polish market for health services. The operation of public health system in Poland involves conclusion of contracts between NFZ and medical service providers, such as hospitals, out-patients, individual medical practices, etc. Prior to signing such contracts, NFZ organizes tenders. The President of the OCCP contested the condition of so-called “continuity”, applied in such tenders to bidders who cooperated with NFZ in the past. Those bidders were receiving additional points in the process of evaluation by NFZ of submitted offers. This method was discriminating new market entrants, who could not demonstrate such continued cooperation. The OCCP imposed a fine on NFZ, in the amount of nearly 270 thousand Euro.

ZAiKS, the Polish collective society of authors, was again found guilty of a competition violation. The President of the OCCP examined the conditions of termination of contracts concluded by ZAiKS with authors, in relation to entrusting of the collective management of authors’ copyrights. The OCCP challenged a 5-year termination clause, stating that it has anticompetitive effects, preventing authors from choosing another collective society during considerably long time period and creating development barriers to the detriment of competing collective societies. ZAiKS enjoys highly dominant position among such societies. The fine imposed by the OCCP does not exceed 100 thousand Euro.

J. Sroczyński, Wirtschaft und Wettbewerb. Developments in national competition law, No. 12/2009.